KLM soars on Air France talk

Group again denies that a link-up is near

LONDON (CBS.MW) -- KLM Royal Dutch Airlines on Friday surged amid renewed speculation that it will soon announce an alliance with majority state-owned Air France.

KLM
KLM, -25.00%
on Friday again denied a link-up is imminent with Air France's SkyTeam alliance, saying talks with Air France (003112) are not exclusive.

KLM shares were last up 6 percent, or 76 cents, to $13.39 in New York trade.

But traders were ignoring the company's denial on increasing chatter on the alliance. The chief executive of Northwest Airlines
NWAC
a partner of KLM, reportedly said a deal was "definitely" done, and the French transport minister said the two airlines were complimentary.

"We are on the verge of forming what will be the strongest alliance in the world, the SkyTeam alliance with Delta, Continental, Northwest, KLM, Air France and Alitalia," Northwest CEO Richard Anderson told a meeting of the Minneapolis Chamber of Commerce, the St. Paul (Minnesota) Pioneer Press reported.

One report, from the French financial daily L'Agefi, said the French state may swap part of its 54.4 percent equity holding in Air France for KLM (00964) shares.

KLM shareholders would end up with 15 percent of Air France, and the French government would still retain a 20 percent stake in Air France, the report said.

In a note on Friday, UBS said the critical issue in KLM-Air France talks is not the level of equity Air France is prepared to surrender, but the level of KLM's debt it will take on.

The broker added that a full-scale merger is unlikely.

British Airways
BAB, -0.27%
has also been linked with KLM, although a tie-up with Britain's former national carrier is seen as less likely.

KLM has been eager to find a partner, in part due to its small home market of the Netherlands.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.